Either we have significantly underestimated the power of gambling in some folks or what the banks are doing isn’t even close to what consumers need; it’s sorely lacking a true sense of where the nation is when it comes to consumers and their finances. In a time when most responsible adults are doing everything they can to keep more of their cash, several banks are trying to lure them with…prizes and sweepstakes. News is that for now, only a few smaller banks are sinking to these levels, but this isn’t the first time this has happened.
Before we delve too deep into this, let’s take a look at what’s going on just in today’s news and what banks are doing, facing and avoiding:
- Bank of America is looking to sell off forty of its New York and Pennsylvania branches, it was announced today. Those forty offices hold close to $1 billion in deposits and would sell for $20, possibly $30 million each. They’re described as “rural locations” and CEO Brian T. Moynihan is said to be looking for even more ways to cut costs and focus on the more profitable areas – which, as we know, are rarely rural. Some banks have expressed interest, but nothing solid has been announced.
- Meanwhile, in Mississippi, Hancock Bank Hancock Holding, located along the coast in Gulfport, announced it would be closing at least twenty of its branches in the coming days. No other information was made available, but it’s worth watching in the coming days as the timing is interesting.
- Chile’s BCI announced it would be buying City National Bank of Florida for the tidy price of 900 million. Banco de Credito e Inversiones agreed to buy the bank with assets close to $4.7 billion and is now the biggest bank deal of the year. The second largest is nowhere near this amount. Further, BCI will be paying more than one and one half times City National’s book value. It can certainly afford it as BCI is the third largest bank in Chile and has branches in the Miami area with that one branch alone touting $3 billion in assets. “BCI has been successfully operating in Miami for 12 years through our subsidiary,” Lionel Olavarría, chief executive of BCI, said in the press release. “We see great opportunities in the Miami market, and we know it well. As part of our international strategy, the purchase of CNB is the next natural step in that market.”
What Banks are Doing
But back to the games. These new “prize linked checking accounts” are being used to attract the inner gambler in all of us. They work by giving new customers the chance to win cash (small amounts, mind you) and prizes. There is a huge list of rules, though. Not only do you have to open a new checking account, but you have quotas you must meet just to play. What we’re hearing, though, is that some banks are upping the ante in what they’re giving away as more banks and credit unions enter the ring. In fact, Fifth Third Bank just completed its “What Would You Do With $15,000?” sweepstakes. What banks are doing is taking a huge risk – and an unnecessary one.
Players were required to pay at least five bills online just to enter. Anything more than that garnered more entries. The goal is to not only lure new customers, but to keep them, too. It’s no secret that we’ve become far more aware of who we do business with. We’re comparing credit card interest rates, examining the terms and conditions and generally becoming better informed. Banks are seeing that as an invitation to present us with these contests, “We know you’re all about finding the best deal and here’s what we’ll do for you…” kind of mentality.
One credit union in Florida even has a catchy new name for one if its accounts: Xtreme Checking. We’re wondering if it’s trying to draw in the local bodybuilders? Those in extreme sports, perhaps? One thing is clear: they’re targeting the younger generation. Their prize-linked checking account rewards account holders automatically with thing like Xboxes, gift cards and Kindle Fires. All the users have to do is use their debit card during the month. Of course, the more he uses it, the more he stands to win.
Overlooking the Real Needs
What we’ve yet to see are the programs designed to help the unbanked and underbanked in this nation get back on track. Is it because banks are hoping these consumers will opt for their prepaid products, instead? That’s all fine and good except for the fact that many are going to run into a lot of problems in the very near future – one look at the extensive rules in ObamaCare makes that abundantly clear. Already, there are worries that the insurance companies are going to allow those consumers to bypass them because they’re viewed as the ones with spotty credit. Apparently, those who value an X box are up for grabs, though.
Make no mistake – these banks are missing the mark and once again, it’s going to be the consumers who pay. And for those who believe these gimmicks are the cure-all, think again. There are massive numbers of rules and restrictions with the ones we reviewed. There are fees, minimum transactions and “deal breakers”. The Xtreme checking account requires customers to use their debit card at least 15 times before the first entry is even made on their behalf. Others require customers open both checking and savings accounts and still others have requirements that they must write a certain number of checks each month (do people even still write checks at all?)
Irresponsible for Banks
Promotions are fine – even for banks – but to use these types of methods is irresponsible, especially in a time when nothing in the financial sector is certain. Besides, who’s to say that even if new customers are lured, that the bank won’t sell out next month, voiding the sweepstakes, contests and giveaways in their entirety? The better option for consumers is to look past the gimmicks and think with a solid mindset of choosing what’s best long term for the financial needs. Any bank that sways them from that should perhaps be avoided. If you want to gamble, head to Mississippi – where Hancock Bank is selling out – and hit the casinos along the beach.